Self Assessment deadline: Don’t bank on too much goodwill from HMRC this year

Accountancy firm BDO has warned that the 5.7 million taxpayers who have yet to file their tax returns should not expect the same leniency from HMRC as in previous years.

Late filing and late payment penalties were waived for a month after the 31 January Self Assessment deadline in 2020 and 2021 due to Covid-19.

However, with Covid-19 pressures easing, HMRC is expected to enforce these penalties again this year.

HMRC wants people to pay their tax in full and on time.

However, the tax authority has advised taxpayers who may find it difficult to pay their tax bill in time to file their tax return as soon as possible anyway.

This is to give them sufficient time to seek advice and if required obtain a time to pay arrangement.

While certain arrangements can be set up online directly with HMRC, others can only be arranged after providing information to HMRC’s debt management teams.

This year, many taxpayers are choosing to settle their Self Assessment tax bill via the HMRC app which launched in February 2022.

Since that time, more than 50,000 taxpayers have used the app to make £50m in Self Assessment payments, according to HMRC.

However, BDO is warning taxpayers who are in arrears that HMRC is expected to get much tougher when it comes to recovering tax debts in 2023.

In October 2022, compulsory liquidations of companies returned to pre-pandemic levels for the first time, partly as a result of an increase in winding-up petitions filed by HMRC.

While personal bankruptcies are still low compared to pre-pandemic levels, they are also expected to rise in 2023 with HMRC taking enforcement action to collect outstanding tax bills.

HMRC’s debt collection powers have expanded over recent years.

It can recover some debts directly from bank accounts, ask for security for tax debts, use bailiffs and, in some cases, seek to transfer a company’s liabilities to its directors.

The tax authority has also recently announced that its officers will take card readers with them when they visit taxpayers’ premises or homes to pursue tax debts.

Dawn Register, Head of Tax Dispute Resolution at BDO said:

“The number of people filing their tax returns over the Christmas period was down almost 30% versus last year, and HMRC’s warning that there are 5.7m people still yet to file their returns should be a wake-up call to many that they need to take prompt action.

“During the pandemic, HMRC did show some forbearance. Taxpayers were allowed to defer Self-Assessment and VAT payments, there was a moratorium on creditor-led insolvency action and HMRC temporarily suspended proactive debt collection activity.

“The result was that tax debt ballooned. While the Revenue has worked hard to reduce this, the latest figures show total tax debt currently stands at £46.9bn. That’s more than double the pre-pandemic level at the end of March 2020 when tax debt was £19bn. As a result of this huge increase, HMRC’s Debt Management teams will be under considerable pressure to bring in the cash.

“While HMRC is offering time to pay arrangements to those who are genuinely going to find it difficult to pay their tax on time, they’re unlikely to give any waiver for late filing or late payments and are expected to get tougher on those with outstanding debts.

“Those paying late will also be hit with higher interest charges this year. The late payment interest rate is set to rise to 6% on unpaid taxes from 6 January 2023, the highest rate since November 2008. Taxpayers in arrears should take note.”